By Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- The stock market is looking vulnerable
after an extended selloff in tech Friday sent the Nasdaq below
4,000 and wiped 1% off the other main indexes.
U.S. stocks built on sharp losses from a day earlier and were
hurt by a disappointing earnings report from J.P. Morgan Chase
& Co.
The S&P 500 (SPX) has retreated in a hurry from its April 2
record close, finishing 4% below that level Friday and under a key
chart level, its 50-day moving average.
The benchmark slid 17.39 points, or 1%, to close at 1,815.69,
and it lost 2.7% for the week. The Dow Jones Industrial Average
(DJI) shed 143.47 points, or 0.9%, to finish at 16,026.75. The
blue-chip index slumped 2.4% for the week, snapping its streak of
three up weeks in a row.
The Nasdaq Composite(RIXF) slid 54.37 points, or 1.3%, to
3,999.73, closing under 4,000 for the first time since Feb. 3. The
tech-heavy index fell 3.1% for the week, with its biggest daily
loss coming on Thursday, when traders went after biotech and other
high-growth stocks with a vengeance. The Nasdaq endured its worst
weekly percentage drop since June 2012, and it has fallen for three
weeks in a row.
Shares in J.P. Morgan (JPM) lost 3.7% on Friday after the
banking giant reported first-quarter earnings below market
expectations, making it the worst performer among Dow components.
Meanwhile, Wells Fargo (WFC) rose 0.8% after its quarterly profit
beat forecasts.
In U.S. economic news, the Labor Department said the
producer-price index gained 0.5% in March, topping the 0.1%
increase seen by economists polled by MarketWatch. The Federal
Reserve wants inflation to rise, but the central bank hasn't had
much success in nudging it higher, so officials likely welcomed
Friday's news on wholesale prices.
A consumer sentiment gauge rose to a preliminary April reading
of 82.6, topping expectations. Economists polled by MarketWatch had
expected a preliminary April level of 80.8 for the sentiment index
from the University of Michigan and Thomson Reuters.
Debate over what's next
Some market watchers see further pain for stock investors, but
others have stayed bullish. The sharp slide that started in
so-called momentum stocks has many talking about a shift in
leadership to value from growth now that the current bull market is
more than five years old.
"While the market is roughly flat for the year, the recent
leadership rotation is causing understandable angst for many
investors," said Jonathan Golub, chief U.S. market strategist at
RBC Capital Markets, in emailed comments early Friday. "We remain
comfortable with our 2,075 S&P 500 target and cyclical sector
bias including overweights in Financials, Industrials,
Discretionary and Health Care."
Golub argued that fundamentally, not much has changed.
"We would be more apt to change this outlook if we saw signs of
either fundamental deterioration in the economy or indications that
Fed policy was negatively impacting markets," he said in his note.
"Neither of these conditions are present, in our view."
Read a recap of MarketWatch's stock-market live blog for
Friday
On the other hand, Peter Cardillo, chief market economist at
Rockwell Global Capital, maintained this week marks just the
beginning of a sizable slide for stocks.
"What happened yesterday is the start of a correction, an
earnings-driven correction," he told MarketWatch on Friday. He said
first-quarter earnings won't be "overly terrible," but the latest
batch of results, hurt by severe winter weather, will come in worse
than in prior quarters.
Cardillo predicts the S&P 500 could fall 6% to 8% below
Wednesday's close, which was around 1,872. "I don't think we go
beyond that," he said, referring to a decline of 6% to 8%. (Read
more: Bank of America strategist sees correction in autumn, not now
http://blogs.marketwatch.com/thetell/2014/04/11/a-bigger-10-15-correction-is-coming-this-autumn-bank-of-america-merrill-lynch/.)
Among other key movers, the iShares Nasdaq Biotech ETF(IBB)
switched between gains and losses before closing with a loss of
2.9%. The ETF fell 4.4% for the week, suffering its seventh down
week in a row and closing below its 200-day moving average.
All of the S&P 500's 10 sectors lost ground Friday, with
utilities falling the least, and consumer discretionary and
materials faring the worst. With the S&P 500 down 1.8% in 2014
to date, the Utilities Select Sector SPDR ETF(XLU) has become a new
market darling, but strategists have offered caveats about the
defensive play's 9.8% rise so far this year.
Thursday's sharp selloff for Wall Street markets triggered heavy
selling elsewhere. In Tokyo, the Nikkei 225 index slid 2.4% on
Friday, hitting a low for the year so far. The Stoxx Europe 600
closed down 1.4% on Friday, losing 3.1% on the week.
Across other markets, oil prices (CLK4) moved higher, while the
dollar inched up against its major rivals. Gold (GCM4)edged lower
Friday, but gained for the week.
More from MarketWatch:
This stock market needs a correction
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Utilities ETF is the new market darling; here are some
caveats
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